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Taxes and Spending

2023 Legislative Session

ACRE Taxation and Spending Policy Recommendations

Academic Research

“State Taxes and Manufacturing Productivity: A Case Study of Arkansas” by Jacob Bundrick

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From 2002 through 2012, compared with its surrounding states Arkansas saw less growth in the real dollar value of manufacturing, a greater decline in manufacturing’s share of gross domestic product, and a faster rate of job loss in manufacturing. One reason for these outcomes is manufacturing’s slow growth in labor productivity, which is defined as growth in the dollar value of output per manufacturing employee, adjusted for inflation. This study examines the relationship between state and local taxes and labor productivity in manufacturing. Bundrick finds that total state and local tax burdens reduce output per manufacturing employee, primarily through sales and corporate income taxes. Legislators across all states should consider the distortionary effects of taxes when making tax-policy decisions, because these decisions will influence not only manufacturing productivity, but also the rate of economic growth.

“The Determinants of the Severity of State Fiscal Crises” by David T. Mitchell and Dr. Dean Stansel

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During the most recent recession, many state governments faced substantial budget shortfalls. These shortfalls are often blamed on external factors such as the declining economy or reductions in federal aid. Less attention is given to what politicians themselves do, especially during expansionary years—whether they enact spending increases, implement tax cuts, increase the size of their rainy day funds, or follow some combination of these strategies. We examine these factors and find that fiscal stress tends to be positively associated with spending growth, negatively associated with the size of rainy day funds, and not statistically significantly associated with the unemployment rate or with federal aid.

ACRE Working Papers

“Arkansas: The Road Map to Tax Reform” by Jeremy Horpedahl and Nicole Kaeding

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The last comprehensive tax reform in Arkansas took place in 1971. The previous tax reform took place in 1929. With the creation of the Arkansas Tax Task Force, Arkansas is ready to challenge the status quo and pass tax reform. Before the creation of this task force, the Arkansas Center for Research in Economics partnered with the Tax Foundation to publish this study. Co-written several scholars including Dr. Jeremy Horpedahl, an ACRE scholar and associate professor at the University of Central Arkansas, this report analyzes the state of taxation in Arkansas. It seeks to catalog Arkansas’s strengths, discuss the challenges Arkansas faces, and explore possible solutions. It makes several suggestions to improve the tax code in areas such as the individual income tax, the corporate income tax, the sales tax, and property tax.

“Learning from Other States’ Successes and Failures in Tax Reform” by Jeremy Horpedahl and  Nicole Kaeding

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After “Arkansas: The Road Map to Tax Reform” was published, many Arkansans questioned whether the reforms described are even possible? Have any other states tried these reforms? The answer to that question resulted in this research paper, which goes into detail about the many reforms other states and jurisdictions have enacted that are very similar to what was written about in “Arkansas: The Road Map to Tax Reform” and to what is being debated in Arkansas. These other jurisdictions include Utah, North Carolina, Indiana, the District of Columbia, and Kansas. The details and stories from this research paper describing what other states have experienced when passing tax reform furnish several important lessons that can help Arkansans understand the possible results of tax reform.

“There’s Nothing Natural about the State of Government Spending in Arkansas” by Jeremy Horpedahl and Jacob Bundrick

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Click to view a one-page infographic based on this research.

Despite being one of the poorest states in the nation, Arkansas has high state government spending, even compared to similar states. Arkansas has higher state spending per capita than its bordering states and than other regional “competitor states,” specifically Alabama, Florida, Georgia, North Carolina, South Carolina, and Virginia. When federal transfers are subtracted from state government spending, Arkansas still has far higher spending than its competitor states. In this study, Dr. Jeremy Horpedahl and Jacob Bundrick undertake a comprehensive analysis of how Arkansas got where it is today and of the reforms necessary to put Arkansas on a more sustainable path. Arkansas’s spending trends are very similar to those of other states, but the magnitude of Arkansas’s spending and the institutional environment that has shaped it are unique. Given Arkansas’s history of state spending growth, it would be wise to consider some limits to future increases in spending.

Podcasts

  •  Post-Pandemic Economics: UCA Associate Professor of Economics and ACRE Scholar Dr. Jeremy Horpedahl joins the Platte Institute to discuss some fast-moving economic indicators, and why the big picture economic issues may matter more in the months and years ahead on May 19, 2021.

  • Should We Care About the National Debt?: UCA Associate Professor of Economics and ACRE Scholar Dr. Jeremy Horpedahl joins Texas CEO Magazine‘s Joel Trammell for a discussion of whether CEOs should be concerned about the United States’ skyrocketing national debt on May 6, 2021.

Television

  • “Is Arkansas Prepared for a Recession?“: How could Arkansas be better prepared for the next recession? Keep increasing the state’s Long Term Reserve Fund balance and improve its deposit and withdrawal rules, according to UCA Assistant Professor of Economics and ACRE Scholar Dr. Jeremy Horpedahl. Horpedahl joined Jay Bir of Capitol View on KARK on March 8 to discuss Gov. Asa Hutchinson’s proposed state budget and ACRE research on the Long Term Reserve Fund, or the state’s savings account.

  • “Trade War Tariffs”: How have Arkansans been affected by the trade war between the United States and China? UCA Assistant Professor of Economics and ACRE Scholar Dr. Jeremy Horpedahl was a guest of Steve Barnes, host of Arkansas Week on AETN on August 9, 2019 to discuss this and more. Horpedahl was joined on the panel by Harrison Pittman, director of the National Agricultural Law Center, a unit of the University ofArkansas System Division of Agriculture. Some of the discussion focused on tariffs’ effects on Arkansas’s farms and businesses, but Horpedahl also pointed out how Arkansas consumers are being harmed.
  • “Governor’s Tax Cut Plan”: UCA Assistant Professor of Economics and ACRE Scholar Dr. Jeremy Horpedahl was on Capitol View on February 4, 2019. He discussed the Arkansas governor’s tax cut plan and what it means for the state, as well as other potential tax changes for Arkansas during the 2019 session.
  • “Pros and Cons of Issue 5 Minimum Wage Hike”: UCA Assistant Professor of Economics and ACRE Scholar Dr. Jeremy Horpedahl discussed Issue 5 in a segment on THV on October 30, 2018.
  • UCA Assistant Professor of Economics and ACRE Scholar Dr. Jeremy Horpedahl discussed the consequences of raising the minimum wage in Arkansas on AETN’s Arkansas Week on October 19, 2018.
  • “Arkansas Tax Task Force Refines Recommendations for 2019 Legislation”: ACRE Scholar Jeremy Horpedahl was interviewed by KARK on August 7, 2018, after an Arkansas Tax Task Force meeting in which the task force refined its recommendations to the legislature.
  • ACRE Scholar Dr. Jeremy Horpedahl was a guest on the Dave Elswick Show on 101.1 FM. He discussed tax reform on May 29, 2018.
  • On February 18th, 2018, ACRE Scholar Dr. Jeremy Horpedahl was interviewed on Capitol View by Jessi Turnure, KARK political correspondent, about the book Horpedahl co-authored with the Tax Foundation concerning the state’s tax code as well as about the upcoming fiscal session.

Op-Eds and Commentary

  • “Getting to zero“: op-ed by UCA Associate Professor of Economics and ACRE Scholar Dr. Jeremy Horpedahl published in the Arkansas Democrat-Gazette on June 28, 2021 about gradually reducing Arkansas’s income tax burden to zero.
  • “Be prepared“: op-ed by UCA Professor of Economics and ACRE Director Dr. David Mitchell published in the Arkansas Democrat-Gazette on June 7, 2021 about reforming and improving Arkansas’s Long-Term Reserve Fund.
  • “Want some cash?”: op-ed by former Legislative Research Associate Dr. Nathan Smith published in the Arkansas Democrat-Gazette on April 10, 2021. Smith outlines several ways Arkansas lawmakers can best spend the one-time funds without creating budget problems in years to come.
  • “Iron it out”: op-ed by former Legislative Research Associate Dr. Nathan Smith published in the Arkansas Democrat-Gazette on February 12, 2021 about the state’s tax cliffs.
  • “Paying for roads“: op-ed by UCA Associate Professor of Economics and ACRE Scholar Dr. Jeremy Horpedahl published in the Arkansas Democrat-Gazette on September 25, 2020 about sales taxes and road funding.
  • “State status check”: article by Dr. Jeremy Horpedahl, ACRE Scholar and UCA Assistant Professor of Economics, and National Taxpayer Union Foundation Economist Nicole Kaeding published in the Arkansas Democrat-Gazette on February 15, 2020. In their article, they discussed how Arkansas’s sales taxes have generally increased, income taxes have decreased, and property taxes have generally stayed the same over the past decade.
  • “Rainy days ahead”: Is Arkansas’s financial forecast filled with rain? Dr. Mitchell authored an op-ed published in the Arkansas Democrat-Gazette that discusses if Arkansas is prepared for the next recession. Mitchell gives policymakers a number of options to improve the Natural State’s rainy-day fund, a kind of state savings account. He also points to various economic indicators that suggest another recession is a real possibility.
  • “The Impact of Tax Cuts on Arkansas Households”: article by UCA Assistant Professor of Economics ACRE Scholar Dr. Jeremy Horpedahl and Tax Foundation Director of Special Projects Nicole Kaeding, published by the Tax Foundation on December 21, 2018. Horpedahl and show how proposed tax cuts would affect seven different examples of income.
  • “Arkansas Business Status and Future Under The Trump Era Economy”: transcript of panel discussion featuring ACRE Scholar Jeremy Horpedahl at the 66th Annual Conference of Arkansas College Teachers of Economics and Business on September 28, 2018. Panel moderator was ACRE Scholar and UCA Associate Professor of Economics Tom Snyder.
  • “Tax Cut for Thee? What Changes Mean for Arkansas”: op-ed by ACRE Scholar Dr. Jeremy Horpedahl and Tax Foundation Director of Federal Projects Nicole Kaeding published in the Arkansas Democrat-Gazette on September 13, 2018.
  • “Reform Taxes Now: By Standing Still, We Fall Behind”: op-ed by ACRE Scholar Dr. Jeremy Horpedahl and Tax Foundation Director of Federal Projects Nicole Kaeding, published in the Arkansas Democrat-Gazette on May 21, 2018.
  • “To Tax or Not to Tax?”: op-ed by ACRE Scholar Dr. Jeremy Horpedahl published in the Log Cabin Democrat on October 29, 2017.
  • “The Right Approach: Cut Texarkana’s Tax Exemption”: op-ed by ACRE Scholar Dr. Jeremy Horpedahl and Nicole Kaeding of the Tax Foundation, published in the Arkansas Democrat-Gazette on July 22, 2017.
  • “Pull the Trigger: Tax Cuts Based on Revenue Prudent”: op-ed by ACRE Director Dr. David Mitchell, published in the Arkansas Democrat-Gazette on July 20, 2017.
  • “Make State Great: Improve Business Environment”: op-ed by ACRE Scholar Dr. Jeremy Horpedahl, published in the Arkansas Democrat-Gazette  on May 4, 2017.
  • “A Simpler System: State’s Tax Policy Too Complex”: op-ed by ACRE Director Dr. David Mitchell, published in the Arkansas Democrat-Gazette on December 19, 2016.
  • “Reform Taxes Now: Arkansas’ System Can Improve”: op-ed by ACRE Scholar Dr. Jeremy Horpedahl and Nicole Kaeding of the Tax Foundation, published in the Arkansas Democrat-Gazette on November 28, 2016. 
  • “Reform, Not Perks. Fix State’s Corporate Tax System”: op-ed by ACRE Scholar Dr. Jeremy Horpedahl, published in the Arkansas Democrat-Gazette on April 29, 2016.
  • “Taxes Take Their Toll on Arkansas Manufacturing”: op-ed by ACRE Policy Analyst Jacob Bundrick, published in the Jonesboro Sun on May 28, 2015.
  • “Legislators Miss Opportunity”: commentary by ACRE Policy Analyst Jacob Bundrick, published in the Arkansas Business on May 25, 2015.

You can read more taxes and spending-related commentary at The ACRE Review.